Draghi comes through, but is it enough for Europe?
December 3, 2015, 6:08 pm

The QE stimulus program will now until March 2017, Draghi said, and possibly beyond [Xinhua]

Following a meeting of the ECB on Thursday, Draghi announced that while interest rates will be kept at 0.05 per cent, deposit interest rates from commercial banks will be cut from -0.2 to -0.3.

This would mean that banks that hold money overnight at the central bank would have to pay for the service; it would, therefore, be in their benefit to encourage lending.

The , began in March 2015 as a means to help the Eurozone members pull out recession, avoid deflation, and weaken a stronger-than-needed euro currency.

The new stimulus program, also known as quantitative easing, will now have the ECB buying back 60 billion euros ($68 billion) in bonds every month until the program terminates in March 2017.

The previous termination date was September 2016.

Draghi also said that the ECB would expand the available assets as part of its bond-buying scheme.

“We decided to include, in the public sector purchase programme, euro-denominated marketable debt instruments issued by regional and local governments located in the euro area in the list of assets that are eligible for regular purchases by the respective national central banks,” he said in prepared statements given to the media on Thursday.

The ECB chief again kept the possibility open that the stimulus program could be extended beyond March 2017.

As in previous months, the ECB appears very concerned about current eurozone inflation of 0.1 per cent.

“Today’s decisions were taken in order to secure a return of inflation rates toward levels that are below, but close to, 2 per cent and thereby to anchor medium-term inflation expectations,” Draghi told reporters at a news conference.

Two per cent is the ideal inflation rate that spurs growth, the ECB says.

The current 0.1 per cent inflation rate encourages hoarding of commodities and discourages productivity as industry waits for prices to go up again.

For the time being, the euro – which should have weakened on Draghi’s comments – reversed growth and jumped from 1.05 to 1.08 against the dollar on Thursday evening.

Draghi also hinted that not all members of the ECB agreed to extend the QE program.

Rifts within the Central Bank are also threatening consensus on stimulus programs as early as the first quarter of 2015.

Ewald Nowotny, Austrian Central Bank chief, and German Central Bank President Jens Weidmann at the time led a group within the ECB which believes that no quantitative easing is needed in the Eurozone at this time.

Both financial heavyweights have echoed previous calls that more time be allowed for current corrective measures launched by the ECB before other initiatives are considered.

They also minimized the effect that the current low inflation rate would have on European markets.

The BRICS Post with inputs from Agencies